Cash investments are liquid, relatively safe and have shorter investment periods. Traditional checking and savings accounts at banks and credit unions are the most common. They offer guarantee of principal (FDIC insurance up to a certain amount) but earn low or no interest. Other cash-based types include:

Certificates of deposit (CDs): Certificates or short-term obligations of banks, savings and loans, or other financial institutions usually range from three months to five years. Only CDs with maturities six months or less should be considered liquid.

Treasury bills: These short-term debt instruments are issued by the U.S. Treasury, purchased at a discount and mature in one year or less. For example, if you purchase a $1,000 26-week T-bill for $975 you would get $1,000 when it matures in 26 weeks.

Savings bonds: Issued by the U.S. government, the different kinds of savings bonds are E, EE, H and I. Face values range from $50 (EE bonds) to $10,000 (H bonds). Some savings bonds are purchased at half the face value and mature at face value. Maturity dates depend on the rates of interest during the holding period.

Money market funds: These mutual funds invest solely in short-term debt instruments. They can be converted quickly to cash, may offer features such as check writing and are considered conservative because the variety of assets they invest in is limited.

Cash investments provide:

Great flexibility

Low risk of loss

High liquidity

Short time commitment

Easily accessible emergency funds

Drawbacks to cash:

Low return on investment

May not keep up with inflation

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. While the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money while investing in the fund. Don't confuse money market funds with bank money market accounts.

Annuities

"Annuities can provide you with a guaranteed income source to help ease worries of running out of money in retirement."

Annuities can provide you with a guaranteed income source to help ease worries of running out of money in retirement. You can purchase an annuity with an income option that pays income guaranteed to last for the rest of your life. An annuity is a contract between you and an insurance company. During the accumulation phase, you pay money to the insurance company (premiums). In exchange, the insurance company guarantees to make payments back to you at regular intervals. This is called annuitizing, and once selected, it is not reversible. This is the payout phase. You can purchase an annuity with an income option that pays income guaranteed to last for the rest of your life, even after your account value is completely depleted. This is the insurance part. All guarantees are backed by the claims-paying ability of the issuing insurance company. Annuities' unique structure also provides tax-deferred growth. Annuities are long-term investments for future income and should not be used for short-term goals.

Guarantees
The life insurance industry has been able to keep its financial commitments partially because of the strength and dependability of the legal reserve system. Though not an insurance or guaranty fund, the legal reserve system is a strict, regulatory framework to which all life insurance companies must adhere in order to offer products to the public.

Your annuity value is the sum of premiums paid (how much money you save in it), minus charges (typically for early withdrawals), plus the interest that has been credited. This value is used to calculate benefits you will receive.

Note that you will need to pay income taxes when you withdraw your money, and if you withdraw money before you reach age 59½, you may be subject to a 10% early withdrawal penalty. Annuities typically have surrender charges which become effective if you withdraw the money before a set number of years. With variable annuities, the value of your investment will fluctuate with the markets; when you cash in your variable annuity, your investment may be worth more or less than you originally paid.

Annuity income options
There are several different annuity income options to choose from. Fixed annuities and variable annuities offer the opportunity to "annuitize" the money you have saved. Annuitization is an option that can provide lifetime income payments. The "annuitization phase" is the payout option that can provide you with income payments for life, depending on the option you select. You can annuitize all or a portion of your account balance and decide how often you want payments. Once you choose, it's generally irrevocable.

If you annuitize a fixed annuity, you'll receive a predictable stream of fixed, periodic income payments. With a variable annuity, the income payments fluctuate depending on the performance of the underlying investment.

Fixed payout options. The cash value of your account is used to fund a fixed payout. That payout offers a locked-in rate and provides a guaranteed dollar amount. Even if interest rates change, your payments won't change unless the option includes an inflation adjustment feature.

Variable payout options. This option provides scheduled benefit payments and the potential for investment growth that, historically, has outpaced the cost of living. Your payments will fluctuate with the performance of the investment options and the interest rate you have chosen.

Combo fixed and variable payout option. To minimize investment risk and maximize returns, you may wish to combine fixed and variable payout options.

Guaranteed lifetime payout options
This payout method typically offers three options that can turn your annuity into regularly distributed income for as long as you live. All guarantees are backed by the claims-paying ability of the insurance company.

Life only. You'll receive the income for as long as you live, but the insurance company doesn't make payouts to anyone after you die. This option usually pays the highest income possible.

Life with "period certain." You'll receive income for as long as you live, and the insurance company guarantees to continue making regular payouts (to your beneficiary) for the remainder of the guarantee period if you die. The period certain typically ranges from five to 20 years.

Joint and survivor. The insurance company pays income as long as either you or your co-annuitant or beneficiary lives. You can also specify a larger payment while you are both alive with a reduction in the payout amount after the first death.

Income for a specific period for fixed and variable annuities
Options may be available that pay income for a fixed period but are not guaranteed for life.

Partial withdrawals
If you aren't ready to receive annuitized distributions but you need to meet certain financial needs, this option allows you to receive partial withdrawals. Meanwhile, the rest of your funds will continue to grow tax deferred. Unless an exception applies, the distribution may be subject to a 10% federal early withdrawal penalty if you are under age 59½.

Single-sum (lump-sum) distribution
You can withdraw all the money from your annuity as a single, lump-sum payout. Unless an exception applies, the distribution may be subject to a 10% federal early withdrawal penalty if you are under age 59½.

Systematic withdrawals
As an alternative to annuitization, systematic withdrawals let you receive income automatically at specified intervals. But you still maintain access to your accumulated retirement account balance. You can make systematic withdrawals by:

Specified dollar amount

Specified percentage

Substantially equal periodic payments

Five-year payment method

Note that this method could eventually reduce your annuity balance to zero. Also keep in mind

that unless properly structured, the withdrawals may be subject to a 10% federal tax penalty if you are under age 59½.

Leave the funds on deposit

If you don't need income right away or if you want to preserve capital for your estate, you might be able to leave your funds on deposit. The benefit? Your annuity can continue to grow tax deferred until you withdraw it or to meet required minimum distributions in an eligible retirement plan.

Optional income protection for variable annuities

If you own a variable annuity, you may be able to purchase an optional guaranteed minimum withdrawal benefit (GMWB) to help protect your retirement income against market downturns. A GMWB allows the withdrawal of a maximum percentage each year of an amount that increases with market gains but does not decrease with market downturns.

Mutual funds

"Mutual funds pool the assets of many investors to buy a collection (portfolio) of different securities which are overseen by a fund manager or team."

Mutual funds can help you diversify across many stocks and bonds. Mutual funds pool the assets of many investors to buy a collection (portfolio) of different securities which are overseen by a fund manager or team. Managers invest the assets according to a fund's prospectus, which describes its objectives, history, risks, financial statements and manager backgrounds. Mutual funds can diversify individual investments across many stocks or bonds.

Before investing in a mutual fund, you should be familiar with its underlying assets: stocks, bonds and cash equivalents:

Stocks are ownership shares of a corporation.

Bonds are certificates of debt or negotiable promissory notes of a corporation or public body that promise to pay periodic interest until the debt is repaid.

Cash equivalents are short-term investments with a high degree of safety that can be converted to cash quickly, such as treasury bills and money market securities.

Over the past 25 years, mutual funds have attracted trillions of dollars from investors. While mutual funds offer the advantages of diversification and professional management, they also involve risk. Fees and taxes may also diminish a fund's returns. Understand the advantages and risks of investing to choose products that match your goals and risk tolerance.

Fees, expenses and taxes
All mutual funds have fees and expenses which reduce the return on your investment, particularly over the long term. Before investing, read the fund's prospectus to assess its fees and annual operating expenses.

Expense categories
Shareholder fees: Includes commissions paid to brokers when shares are bought or sold. Commissions are funded by sales charges (either front-end or back-end).

Annual operating expenses: The costs of managing and operating a fund including management services, record keeping, printing and mailing.

Taxes: Mutual funds must distribute all income and capital gains to shareholders each year. Therefore, shareholders must pay income taxes on any distributions (dividends or capital gains). Each fund company provides an IRS Form 1099 to shareholders annually, summarizing the fund's distributions. When selling shares, shareholders will have either a taxable gain or a loss. If the mutual fund investment is held in a tax-qualified retirement plan, you can defer those taxes until you withdraw the money, usually in retirement. Penalties may apply if you withdraw the money before age 59½.

An investment in a money market fund is not insured by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

Municipal funds: Bonds issued by local and state governments.
Socially responsible funds: Selects companies with investment strategies driven by social and environmental issues.

Specialty funds: Invest majority of assets in equities of a single industry or sector.

Target date funds. Composed of underlying funds, these funds are a convenient way for individuals to be more aggressively invested when they are younger and automatically shift to more conservative investments later in life. The idea is to select a fund whose target date approximately coincides with your desired retirement date. Target date funds are not guaranteed. You can still lose money, even right before and into retirement, and there is no guarantee that they will provide adequate retirement income.

Exchange-traded funds (ETFs)
While not technically mutual funds, these securities share some similarities. Like mutual funds, ETFs are a collection of stocks or other securities. A big difference is that ETFs are traded like individual stocks, so their price fluctuates throughout the day. They are also sold through brokerages which charge a commission each time you buy or sell. Mutual funds are only priced once per day, after the market closes, and may or may not charge to buy or sell shares.

*"Standard & Poor's®," "S&P 500®," "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. The S&P 500 Index is an unmanaged stock index. An investment cannot be made directly in an index.

A few key financial factors to consider:

Risk: A fund's risk, or volatility, can be measured by two calculations: beta and standard deviation. Beta indicates how risky a fund is compared to an index. If the beta is higher than the market's benchmark index average of 1.00, then the fund is considered more volatile, and vice-versa if the beta is less than 1.00. Standard deviation compares the fluctuations of a fund's returns to the fund's own performance rather than comparing to an index. Standard deviation indicates the difference between actual and expected returns. The higher the standard deviation measure, the more volatile the fund will likely be.

Total return: The value of a fund over a set period of time helps determine total return. It includes interest, capital gains, dividends and distributions. For long-term performance, compare the average annual returns for three-, five- and 10-year periods.

Dividend yield: If your goal is steady income, pay attention to the dividend yield. A dividend is the return on investment - the dollar amount of earnings (dividends) each share receives. A fund's dividend yield shows how much a company pays each year relative to its share price. You can calculate the yield by dividing the annual dividend by the current stock price.

Last Updated Date
09.22.17
Important Notice about Purchasing an Annuity From Us

To help the government fight the funding of terrorism and
money-laundering activities, federal law requires all financial
institutions to obtain, verify, and record information that identifies
each person who purchases certain annuity products. What this means
for you: When you purchase certain annuity products from us, we will
ask for your name, address, date of birth and other information that
will allow us to identify you. We may ask to see your driver's license
or other identifying documents.

Securities and investment advisory services offered through VALIC
Financial Advisors, Inc. ("VFA"), member FINRA, SIPC and an
SEC-registered investment advisor. VFA registered representatives
offer securities and other products under retirement plans and IRAs,
and to clients outside of such arrangements.

Annuities issued by The Variable Annuity Life Insurance Company
(“VALIC”). Variable annuities distributed by its affiliate, AIG
Capital Services, Inc. (“ACS”), member FINRA. VALIC, VFA and ACS are
members of American International Group, Inc. (“AIG”).

AIG is the marketing name for the worldwide property-casualty, life
and retirement, and general insurance operations of American
International Group, Inc. For additional information, please visit our
website at http://www.aig.com. Products and services are
written or provided by subsidiaries or affiliates of American
International Group, Inc. Not all products and services are available
in every jurisdiction, and insurance coverage is governed by actual
policy language. Certain products and services may be provided by
independent third parties. Certain property-casualty coverages may be
provided by a surplus lines insurer. Surplus lines insurers do not
generally participate in state guaranty funds and insureds are
therefore not protected by such funds.

VALIC represents The Variable Annuity Life Insurance Company and its
subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement
Services Company.

This information is general in nature and may be subject to change.
Neither VALIC nor its financial advisors or other representatives give
legal or tax advice. Applicable laws and regulations are complex and
subject to change. Any tax statements in this material are not
intended to suggest the avoidance of U.S. federal, state or local tax
penalties. For legal or tax advice concerning your situation, consult
your attorney or professional tax advisor.

Investing
involves risk, including the possible loss of principal. Investment
values of variable products fluctuate so that investment units, when
redeemed, may be worth more or less than their original cost.